ITEM 1.      DESCRIPTION OF BUSINESS

General

      FIRST AMERICAN SCIENTIFIC CORP. (the "Company") was incorporated under the laws of Nevada on April 12, 1995. We own the patented kinetic disintegration system called the KDS Micronex System and two additional process patents using the equipment. One other process patent application is pending. Our System consists of an electrically powered disintegration/drying chamber and feeding system that utilizes kinetic energy and standing sound waves to pulverize various waste materials such as biomass (wood waste), pulp sludge, animal waste, food waste, rubber, glass, and other feed stocks into valuable, fine, dry, talcum-like powders that can be used as a combustible fuel or a high nutrient fertilizer. Our goal is to identify and develop commercially viable A waste-to-resources @ industrial applications for the KDS System. Then we intend to market, manufacture, sell, lease and/or license our system to end users in the forest and pulp and paper industries, in agriculture, in recycling, and in other industries.

Applications

1. Converting biomass to combustible fuel or fertilizer

      Our research and testing to date indicate that the highest potential use for our equipment is found in pulverizing and drying (micronizing) biomass (wood waste) into a fine, dry combustible fuel that can be incinerated in specialized burners to create BTUs (heat energy). The BTUs, in turn can be converted to electrical power through conventional means. For biomass, the critical value of the process is its ability to act as an industrial dryer which can extract water from wood at below boiling temperatures at significantly lower costs than through other conventional methods.

2. Drying and grinding of pulp sludge

      We have also processed wet (80% moisture) pulp sludge, and have shown that potential exists in converting waste pulp sludge to a dry, fibre-like powder and releasing the kaolin clay concurrently, then burning the dry fiber like powder to create BTUs which are recycled back into the paper making process as heat and/or electrical power. This could reduce energy costs, disposal costs, and environmental problems in the pulp and paper industry.

3. Drying and grinding animal waste/munincipal sewage/food waste

      When micronizing animal manures, the system has proven its ability to kill 99% of all pathogens and coliforms during processing earning it an EPA rating as a pesticide device with registered establishment number 73753 CAN - 001 granted to the Company in January 2001. This "cleansing" of these types of waste products could bring large animal and poultry producers into compliance with EPA regulations as well as create a nutrient rich "clean" end product suitable for recycling as fertilizer.

-3-

      When micronizing a mixture of food waste, wood waste and chicken manure, a fine, dry, pathogen-free dry powder is produced which is suitable as a high nutrient fertilizer base, as a filler, or, depending on the content, as cattle feed.

4. Pulverizing of mineral rock to release precious metals

      When micronizing mineral rock, the process reduces the rock to a consistent fine dry powder as small as -400 mesh which has proven sufficient to separate and release precious and heavy metals mechanically without the use of chemicals. Development work continues to increase the durability of the equipment to withstand the heavy wear imposed when processing hard rock. Although the process has proven to be 97% efficient, commercially viable processing volumes have not yet been achieved. This process has now been patented.

5. Micronizing scrap rubber

      When micronizing rubber, a cryogenic cooling process can facilitate the recycling of scrap rubber by pre-freezing it in a cooling chamber and injecting it through a pneumatic feed system into a pulverizing chamber. The method has proven that the KDS system can pulverize (shatter) rubber into a fine mesh suitable for re-cycling as a base material for other rubber based products. Commercially viable quantities are not yet proven. This process has now been patented and the company is seeking a joint venture partner who will participate in the development of this application to commercial viability. No further work has been done this year, and the application is dormant.

6. Micronizing of recycled Glass

      When micronizing glass, the process reduces it to a consistent fine dry powder as small as 20 microns which has proven valuable as a strengthener in asphalt, concrete and ceramics.

The KDS Equipment

      The KDS uses a patented high speed rotary action to create sufficient kinetic energy to pulverize and dry (micronize) raw materials that are introduced into the chamber without cutting.

      The KDS machine weighs approximately five tons and measures sixteen feet high, by ten feet long, by eight feet wide. It is powered by a 150 or 250 hp main drive electric motor and uses 5 smaller ancillary motors to move product though the chamber and out through the taurus. The feed material is typically one inch in diameter and carried by a pneumatic lift or conveyor and material grading system, passing through the KDS system at various rates, dependent up product size, moisture content and hardness. The life span of the KDS machine is greater than ten (10) years and requires ongoing service and replacement of consumables on a daily basis. Maintenance is minimal and requires less than thirty minutes per day and twenty-four hour servicing twice a year.

      There are currently three models and variations thereof available, designed for various feedstocks and applications.

-4-

Patents issued and pending

Device and Method for Comminution - US Patent #6,024,307 and Canadian patent # 2,218,429

      A patent was issued for the KDS as for a "device for comminution" on November 24, 1998, and its U.S. patent number is 6,024,307 with additional patent applications filed in Australia, Canada, Europe (EEC), Finland, France, Germany, Ireland, Italy, Mexico, New Zealand, Spain, Sweden, Switzerland, and the United Kingdom.

Cryogenic Comminution of Rubber - US Patent # 6,655,167 B2

      On April 20, 2001, we filed a patent application in the United States to protect our research into developing a process for cryogenically freezing non-tire scrap rubber and processing it into a micro-fine powder using the KDS equipment. This patent has now been issued.

Method of Recovery of Precious Metal and Heavy Minerals - US Patent # 6,682,005 B2

      On May 4, 2001, we filed a patent application in the United States to protect our research into developing a process for disintegrating and separating precious metal from hard rock without the use of chemicals. This patent has now been issued.

Method and apparatus for Recovery of Fuel and Clay from Biomass - (pending)

      In November 2002, the Company filed a provisional patent application in the United States to protect its research for the processing wet biomass through the KDS equipment. This application is still pending.

Acquisition of / Ownership of Patents

      On June 22, 1995, we entered into a license agreement with Spectrasonic Corp. (hereinafter "Spectrasonic"), a related party, for the worldwide license to its unpatented KDS for use in rubber and glass recycling and disposal, for a period of ninety-nine years.

      On February 22, 1996, we entered into an additional license agreement with Spectrasonic for the worldwide license to its unpatented Ultrasound Equipment for exclusive use in gypsum disintegration, disposal, recycling, remanufacturing or manufacturing of used or new raw materials.

      On July 2, 1997, we purchased from Spectrasonic Corp all rights to the technology and its patents, whether issued or pending, including all data pertaining to the patent process with respect to the KDS Disintegration System. Upon the final payment to Spectrasonic of 1,000,000 common shares of the Company's stock valued at $0.25 per share which was made on December 1, 1999, an unencumbered right and title to all patents was irrevocably transferred to us.

-5-

Research and Testing

      We continue research with various materials to improve operating efficiencies, to increase volume throughput to economically viable levels, and to identify markets where profitable operation of the equipment can be achieved. Of particular interest is adapting the equipment to dry out heavily moisture laden materials such as biomass from the forest industry, and pulp sludge. In this regard, testing is being carried out in Canada by FASC in Kuala Lumpur, Malaysia by FASCM, in London, England by WRAP, in Japan by JP Steelplantech, and in Korea by JNK Heaters Ltd. Significant progress has been made converting biomass to a fine dry fuel which can be combusted in the dust burning system. All research on rubber processing has been discontinued until a suitable research partner is found.

Government/Environment Regulation

      We are subject to various federal, provincial and local environmental laws and regulations. We believe that our operations currently comply in all material respects with applicable laws and regulations. We believe the trend in environmental litigation and regulation is toward stricter standards, and that these stricter standards may result in higher costs for us and our competitors. Such changes in the laws and regulations may require the Company to make additional capital expenditures which, while not presently estimable with certainty, are not presently expected to be material. Costs for environmental compliance and waste disposal have not been material in the past. In the future, stricter regulations may increase the demand for our products which offer solutions to some environmental problems.

Manufacturing

      Canadian manufacturing of the KDS machine is sub-contracted to Mainland Machinery Limited (MML) in Abbotsford, British Columbia at a fixed price on a case by case basis. Engineering and design assistance are also provided by MML. Our licenses in Malaysia, Brazil, Japan, and Korea provide for local manufacturing in those countries subject to certain conditions.

Technology Licenses granted as of June 30, 2007

Canada - Alternative Green Energy Systems Inc

      In October 2001, we signed an agreement with Thermix Combustion Systems Inc, to form a jointly owned corporation named the Alternative Green Energy Systems Inc. ("AGES"). AGES goal was to adapt the KDS system to create a continuous flow of suitable micronized hog fuel/ wood dust that will be used as a fuel for Thermix's specialized dust burners. FASC and Thermix contributed their respective technologies to design a complete micronizing and dust burning system to be marketed to the Thermix’s contacts in the pulp industry.

      In February 2002, we granted a conditional license to AGES to manufacture and sell the KDS equipment for all applications using biomass in Canada, the USA, and the European Union. In February 2002, AGES signed an agreement with Hydro Quebec Capitech Inc. wherein Hydro Quebec Capitech agreed to invest CDN$1,000,000 equity in AGES's for research and development. On February 21, 2004, that license expired when conditions were not met.

-6-

      On February 23, 2004, we granted AGES a modified exclusive license to design, manufacture and sell a large scale version of the KDS machine to be used in the pulp and paper industry in Canada, the USA, and the European Union.

      In fiscal year 2006, AGES did not sell the required one machine per year, but paid $25,000 in lieu of a sale to maintain its exclusive rights granted under the agreement. By mutual agreement, in July 2006, the license was modified to reduce the territory licensed to Canada and the USA.

      In fiscal 2007, Hydro Quebec Capitech, one of the AGES partners exercised it right under a put clause in the shareholder agreement, causing 100 % of AGES shares to be sold to a third party for one dollar plus assumption of over $1,000,000 of debt. As a result, our shareholdings in AGES were reduced to zero. As of the date of this writing, the new owner of AGES has not paid the license fee and the license is still in default and subject to be cancelled.

      Under the license agreements with AGES, we retain ownership of all patents for the KDS technology and own rights to all the research conducted by AGES.

Malaysia - FASC ( Malaysia ) SDN. BHD.

      On July 8, 2004, we granted an exclusive license for 21 years to First American Scientific Corp (Malaysia) Bhd. Sdn., to market the KDS system in Malaysia, Thailand, Singapore and Indonesia. The agreement required FASCM to purchase one KDS machine and set up a fully operational demonstration plant in Malaysia. This requirement was met in September 2004.

     As of June 30, 2007, we own 50% of the outstanding shares of FASCM.

Japan - JP Steelplantech Co. Ltd

      On September 26, 2005, we granted an exclusive license for manufacturing and marketing the KDS System in Japan to JP Steelplantech Company of Yokohama, Japan. As part of the licensing agreement, JP Steel paid an up front licensing fee and purchased and installed a fully operational KDS at its facility in Yokohama to be used for sales demonstrations and research purposes. JP Steel will also pay a royalty for each machine manufactured and sold in Japan. Marketing efforts are now underway.

      JP Steel Plantech Co. is a well established engineering and equipment manufacturing company owned by four Japanese steel industry companies; Kawasaki Heavy Industries (KHI), Hitachi Zosen (HITZ), JFE Engineering (JFE) and Sumitomo Heavy Industries (SHI).

Korea - JNK Heaters Co. Ltd dba FASC - Korea

      On December 14, 2005, we signed an exclusive license agreement for the marketing of the KDS System in Korea with JNK Heaters Co. Ltd. of Seoul, Korea. As part of our agreement, JNK has paid an up front deposit for a licensing fee and machine purchase, and has purchased and installed a fully operational KDS at its facility in Seoul. JNK may also earn the right to manufacture machines in Korea after meeting certain contractual conditions and will also pay a royalty for each machine manufactured and sold in Korea. FASC Korea has sold one machine to a customer in the limestone

-7-

industry and has purchased a second machine to be installed at a local sewage plant on a trial basis. The license requires a minimum sales quota be met each year commencing in year 2 to maintain exclusivity.

Brazil

      On April 18, 2006, we announced the anticipated signing of an Agreement in Principle to form a joint venture to be named First American Scientific Brazil Ltda. for the manufacture, marketing, and operation of KDS equipment in Brazil, Uruguay and Argentina. This agreement was never finalized as the parties could not agree on certain terms therein. The group, however, purchased one machine which was delivered in June 2007 and negotiations are expected to re-open once that machine is operational.

Summary of Agreements

Other material contracts or agreements:

The Waste and Resources Action Programme -- UK (WRAP )

      In September 2004, we signed an agreement wherein WRAP has agreed to provide funding to develop “value enhanced end-products” from the output of the KDS machine. WRAP has agreed to provide $1,000,000 USD for the purchase and installation of one complete KDS system to be located at a local pulp & paper mill in England. The fund will also pay for market research, scientific research, re-design and adaptation costs for the equipment and supplementary systems for industry-specific applications. The goals of the project are to demonstrate the KDS technology in a working environment, optimize ancillary equipment to improve its efficiency, and identify markets for recycled end products. In December 2004, a KDS Model S-4 was shipped to Aylesford Newsprint in London, England for trial runs and evaluation. The testing is now complete and a final report was issued in April 2007.

City of Prince George, Canada

      We have signed a Memorandum of Understanding the City of Prince George, BC, Canada to assist in solving its environmental cleanup problems with sewage sludge using the KDS Micronex system. This will be the first operation of its kind in the world where the strictly regulated Class B municipal sludge can now be cleaned, bagged and profitably sold to the public as a soil amendment. The initial runs will be monitored for two months, and if satisfactory, the city will establish a permanent facility and purchase up to 4 KDS Micronex machines. To date all trial runs have been satisfactory and many adjustments have been made to accommodate the efficient processing of the sewage sludge. The project is now entering Phase 2 which will commence in October 2007.

AGES agreement with Sustainable Development Technology Canada (SDTC)

      In October 2004, Sustainable Development Technology Canada (SDTC) awarded a research grant to AGES to construct and install a complete waste-to-energy KDS 3000 system at a pulp mill in Eastern Canada. Subsequent to the award, AGES signed a Contribution Agreement for $600,000 Cdn with SDTC to construct a “Wet Wood Waste to Energy” project to be hosted by Flakeboard Company

-8-

Limited (FCL), at their St. Stephen, New Brunswick pulp mill. SDTC is mandated to act as the primary catalyst in building a sustainable development technology infrastructure in Canada and help meet the Kyoto accords. All funding has since been received and expended by AGES.

AGES agreement with Flakeboard Company Limited

      Flakeboard Company Limited has installed all infrastructure equipment to handle wood waste on the project and to convey and store the fuel dust after it has been processed. The FCL total investment includes a reclaimer, silo, various conveyors, a major area electric upgrade, DCS modifications and a civil engineering project to site and enclose all the equipment. Further adaptations to the equipment are on hold pending evaluation by the new owners of AGES.

Market

      The KDS machine has proven viable for softer industrial rock, such as gypsum and zeolite, wood chips or chicken manure (embedded in sawdust), and any biomass at moisture levels below 60%. We continue to research and seek potential markets where operation of the equipment is economically viable. Improvements to the equipment continue and we are constantly experimenting to find solutions that increase throughput on various types of products. Each situation presents unique hurdles to be overcome. In the case of rubber, feedstock becomes elastic with rise in temperature and must be pre-frozen before processing to maintain efficient shattering. In the case of biomass and pulp sludge, the product must not exceed 60% moisture content to avoid clogging of the equipment. In the case of minerals rock, chains must be replaced with hardened steel bars to avoid rapid wear and breakage. In the case of human and animal waste, a de-watering is required prior to processing. Some of these adaptations require additional research and until implemented, there is no certainty that the equipment will be accepted in all the proposed markets.

Competition

      We have competition from other producers of microfine powders, most of who must use a series of equipment to achieve similar results. Some have much greater financial resources than us, but we believe our system is more cost effective than these competitors and that we can reasonably expect to attract a share of the marketplace.

Company Facilities

      Our corporate offices are located at 811 - 100 Park Royal, West Vancouver, British Columbia, Canada, V7T 1A2 and our sales office is located at #26 - 7621 Vantage Way, Delta, British Columbia, Canada V4K 4E2. The phone numbers are (604) 913-9035 and (604) 940-6220, respectively. Fax numbers are (604) 925-1118 and (604) 940-6221.

Subsidiaries and other equity positions

Canada - First American Scientific ( Canada ) Ltd.. - 100 % owned by FASC

      We own 100% of the outstanding shares of common stock of First American Scientific ( Canada) Ltd, a BC company which was formed for the purpose of providing research, development,

-9-

and other services to FASC and its Canadian customers and licensees. The Company changed its name from First American Power Corp to First American Scientific (Canada) Ltd. on May 26, 2005.

Malaysia - FASC (Malaysia) Bhd. Sdn. - 50% owned by FASC

      We own 50% of the outstanding shares of common stock of First American Scientific (Malaysia) Bhd. Sdn. (FASCM) , a Malaysian company incorporated for the purpose of manufacturing and marketing the KDS system in Malaysia, Thailand, Singapore, and Indonesia primarily to the palm oil industry.

Canada - Alternative Green Energy Systems Inc (AGES) - 0% owned by FASC

     We no longer have any shareholdings in AGES.

Employees

      FAS (Canada) Ltd currently has one full-time employee in Canada. Messrs, Nichols and Kantonen are officers of, and members of the boards of directors of both FASC and FAS (Canada) Ltd. We also retains outside consultants when necessary.

Other

      During the fiscal period ending June 30, 2007, we settled various accounts owing by issuance of common stock.

Risk Factors

      1. Going Concern Opinion. At this time, we cannot be sure that we will be successful in our operations. Therefore our independent certified public accountants have issued an opinion that there is substantial doubt about our ability to continue in business as a going concern.

      2. Development and Market Acceptance of New Products. Our success and growth will depend upon our ability to improve and market our KDS machines and KDS processes and to successfully develop and generate revenues from its processes. To date we have been unable to achieve the foregoing.

      3. Liquidity; Need for Additional Financing. We believe that we will need additional cash during the next twelve months. If we are unable to generate a positive cash flow before our cash is depleted, we will need to seek additional capital. There is no assurance that we will be able to obtain additional capital if required, or obtain the capital on terms and conditions acceptable to us. We are currently suffering from a lack of liquidity although our current obligations are not significant. In spite of this, we continue our sales efforts while we continuously seek out additional capital. Our auditors have also issued a going concern opinion.

-10-

      4. Dependence on Suppliers. We rely on a number of suppliers to provide certain raw materials for our products. The interruption of certain sources of supplies or the failure to adapt materials to our changing technological requirements could disrupt our ability to manufacture products or cause us to incur costs associated with the development of alternative sources, either of which could adversely affect our financial performance.

      5. Technology Risk. All manufacturers utilize different applications of known technology. Should a competitor develop a technology breakthrough that cannot be adapted to our system or develop a more effective application of existing technology, our technology would be at risk of becoming obsolete.

      6. Competition. Most of our competition are companies with substantially greater financial, technical and marketing resources than us. If the market for the KDS or its process are established, we expect that additional competition will emerge and that existing competitors may commit more resources to those markets.

      7. Issuance of Additional Shares. On June 30, 2007, there were 196,143,955 shares of common stock (95 %) of the 200,000,000 authorized shares of common stock of outstanding and 3,856,045 shares remain unissued. The board of directors has the power to issue such shares, subject to shareholder approval, in some instances. Although we presently have no commitments, contracts, or intentions to issue any additional shares to other persons, other than in the exercise of options, we may in the future attempt to issue shares to acquire products, equipment, or properties, or for other corporate purposes. Any additional issuance by us, from our authorized but unissued shares would have the effect of diluting the interest of existing shareholders.

      8. Indemnification of Officers and Directors for Securities Liabilities. Our Articles of Incorporation provide that any director, officer, agent and /or employee will be indemnified as to those liabilities and on those terms and conditions as are specified in the Company Act of the State of Nevada. Further, we may purchase and maintain insurance on behalf of any such persons whether or not the Corporation would have the power to indemnify such person against the liability insured against. The foregoing could result in substantial expenditures by us and prevent any recovery from such officers, directors, agents and employees for losses incur as a result of their actions. Further, we have been advised that in the opinion of the Securities and Exchange Commission, indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.

      9. Cumulative Voting, Preemptive Rights and Control . There are no preemptive rights in connection with our common stock. Shareholders may be further diluted in their percentage ownership if we issue additional shares in the future. Cumulative voting in the election of Directors is not provided for. Accordingly, the holders of a majority of the shares of common stock, present in person or by proxy, will be able to elect all of the Company's board of directors.

      10. No Dividends Anticipated. At the present time we do not anticipate paying dividends, cash or otherwise, on our common stock in the foreseeable future. Future dividends will depend on our future earnings, if any, its financial requirements and other factors.

-11-

      11. Lack of Market Research. We have neither conducted nor engaged other entities to conduct market research regarding the demand for our products and services.

      12. Product Liability. We could incur liability for product defects which result in damage from the use of our equipment and products. Any such claims, if successful, could result in substantial losses.

      13. No Insurance Coverage. We are finding it increasingly difficult to obtain adequate insurance coverage against possible liabilities that may be incurred in conducting our business activities. At present, we have not secured any liability insurance. We have potential liability from our general business activities, and accordingly, we could be rendered insolvent by serious error omission.

      14. Non-arms Length Transactions and Conflicts of Interest. We have not engaged in any transactions with our officers, directors and principal shareholders except for accepting non-interest bearing loans from two of our officers. Such transactions may be considered as not having occurred at arms length. We will be engaged in transactions with management and others involving conflicts of interest, including conflicts on salaries and other payments to such parties.

      15. Reliance Upon Current Management. The Company's current operations and future success are greatly dependent upon the participation of our officers, Cal Kantonen and Brian Nichols. If either officer discontinues his services to us, we could be adversely affected.

      16. Lack of Key Man Insurance. We have not obtained key man life insurance on the life of our officers and directors. The death or unavailability of any one of them could have a material adverse impact on our operations.